Everything Solid Melts Into Air

We know we’re close to the moment when Everything Solid Melts Into Air when extraordinary breakdowns are treated as ordinary and the “news” quickly reverts to gossip.

So over 4 million American workers up and quit every month, month after month after month, and the reaction is ho-hum, labor shortage, blah, blah, blah, toy shortage for Christmas, oh, the horror, blah, blah, blah.

These are large numbers. Over 10 million job openings and 6 million hires and 6 million “separations,” i.e., layoffs and the 4.3 million voluntary quits.

The happy story promoted by the corporate media is that this enormous churn is the result of shiny, happy people moving up the work food chain to better-paying jobs.

We know we’re close to the moment when Everything Solid Melts Into Air when every breakdown is instantly reworked into a happy story in which everything is getting better every day, in every way.

The reality nobody in power wants to acknowledge, much less address, is that millions of workers are opting out or burning out and they’re not coming back.

Another happy story promoted by the corporate media is that once all the gummit freebies ended, the lazy, no-good workforce would be forced to take whatever wretched job the billionaires need done at low pay and zero benefits. (But hey, you qualify for food stamps, so it’s all good!).

“Up Yours”

A substantial share of the workforce has declared, “Up yours!” and another share has been so burned out by overwork and constant pressure that they’re done: They can no longer work at this pace and for that many hours.

This enrages the lackeys, toadies, apparatchiks and apologists of the billionaires: How dare you escape from forced labor! The whole economy is based on the bleak choice of Take the job we offer or starve.

The “innovation” (pay attention, neofeudal lords) from SillyCon Valley is to offer an illusion of “choice” in this forced labor system:

In the gig economy, you get to “choose” between Gulag Camp One (low pay, long hours, zero benefits and zero security) and Gulag Camp Two (low pay, long hours, zero benefits and zero security).

Wow! Who knew “choice” was so life-changing?

In a similar fashion, when you can no longer afford rent, utilities, etc., then you get a “choice” of living in your car, if you have one, or fashioning a crate-tent “home” or taking over the ruined camper left by the guy who made the one-way trip to the morgue.

That the neofeudal lords and their lackeys offer the debt-serfs “choices” of forced labor would be comic if the results weren’t so tragic.

The neofeudal status quo is so busy chasing down escapees from the forced-work Gulags that it won’t notice its Wile E. Coyote moment when Everything Solid Melts Into Air.

Does anyone really think the current situation can last? Let’s think about this…

Lovely Fantasies

Imagine an economy so dominated by its central bank that all markets hang on every word of its priesthood as life or death. You know, like the Federal Reserve and the American economy.

Now imagine this central bank issues enormous sums of new money that supercharges speculative activity such as hundreds of billions of dollars in stock buybacks, special purpose acquisition casinos, oops, I mean companies, and so on.

You know, like the Federal Reserve’s trillions in nearly free money for financiers.

Next, imagine that the central bank makes barely concealed promises that should any big gambler lose money in the casino, the bank will flood the financial system with even more nearly free money for financiers and bail out the loser.

Since flooding the system with nearly free money for financiers keeps the speculative frenzy going, the bank has implicitly promised that assets driven higher by speculative frenzy will never be allowed to drop.

This promise naturally incentivizes even more speculative borrowing, leverage and risk, generating a titanic Everything Bubble in which risky assets skyrocket from pennies into dollars and dollars into fortunes.

Now imagine that this speculative frenzy spreads into every nook and cranny of the economy such that everyone is drawn into one casino or another, and previously sober, cautious people are seized by a quasi-religious fervor in which they become convinced that their gambling chips on NFTs, SPACs, meme stocks, obscure alt-coins, homes, collectibles and pretty much anything within the manic swirl of speculative frenzy is now a can’t lose path to carefree permanent wealth because the central bank guarantees it and anyone who questions this is in league with the devil (or worse).

More Fantasy

Next, imagine that as a result of this vast expansion of “wealth” in the Everything Bubble, the entire economy is now dependent on this bubble never popping as speculation is driving incomes and a wealth effect without precedent as every participant feels newly empowered to borrow and spend more because their bubble wealth just keeps rocketing higher.

The problem here is all speculative bubbles pop, and so the central bank’s inflation of a speculative Everything Bubble has backed the entire economy into a corner from which there is no escape:

Either the bubble must keep inflating to ever dizzier heights of delusion and risk or the bubble pops and lays waste to all the phantom wealth.

Lastly, imagine that the enthralled participants in the speculative orgy truly believe the central bank has the power to keep the Everything Bubble expanding forever, or at a minimum bubbling along at a permanently high plateau that guarantees everyone’s phantom wealth will be forever available for tapping and spending.

This is where we are, and it raises one question: Are we really crazy enough to believe this is going to work?

That the Federal Reserve can keep the Everything Bubble expanding essentially forever, or bubbling along at a permanently high plateau?

A Bet on the Madness of Crowds

Are we really crazy enough to believe that conjuring trillions of dollars out of thin air and then leveraging this into tens of trillions of dollars and dumping all this money into assets that don’t increase in utility so that their “value” rises 10-fold even as their utility remains unchanged is sustainable and a solid foundation for our economy?

Unbeknownst to the giddy participants, they’re not just betting on the omnipotence of the Fed Politburo — they’re also making a max-leverage bet that the madness of crowds will never end.

Are we really crazy enough to believe this is going to work? The answer appears to be a resounding “yes” because everyone knows the Fed has our backs and so permanently expanding wealth is guaranteed.

(And if it isn’t, no problem, I’ll jump off the merry-go-round before the music stops. And of course, 99.9% of all punters succeed in doing so.)

In this blissful moment of speculative confidence in a) the music will never stop or b) I’ll jump off just before the music stops, fortune fully intact, the risks are piling up.

They’re just hidden from view. For many, they’ll only be visible when it’s too late.

Regards,

Charles Hugh Smith
for The Daily Reckoning